[Unlock Answer From @10/Pg] Covered Interest Rate Arbitrage
Choose an international company (not based in the United States) on which to base your journal entry. Reflect on the company and the concepts in the unit while considering the current exchange rate and the interest rate for the company you have chosen.Choose three of the prompts below to address in your journal entry.
- Discuss the exchange rate system classification of the home country of the company you have chosen to study.
- What influence has the government of the country had on the exchange rate in recent years, if any?
- Consider the 1-year interest rate of the home country for the company you have chosen to study. In your opinion, is covered interest rate arbitrage feasible for a U.S. investor? Is it feasible for investors of the foreign country? Explain in detail why or why not.
- Based on the theory of purchasing power parity (PPP), what is the general forecast of the value of the currency in the country?
Your journal entry must be at least 200 words in length. No references or citations are necessary.